Does Your Child Need to File a Tax Return?

January 30, 2012

If you’re like a lot of parents, your knee-jerk response might be no. But if your dependent child has “unearned” income from savings and investments or earned income from working, a federal income-tax return may be required.

For the 2011 tax year, a return generally should be filed if your child has:

  • Unearned income of more than $950 or
  • Gross income (whether unearned, earned, or a combination) of more than the standard deduction. As your dependent, your child is entitled to a standard deduction equal to the greater of (1) $950 or (2) $300 plus earned income, up to a maximum deduction of $5,800.

Filing a separate return may not be your only option. You can elect to report your child’s income on your return for 2011 if your child’s income consists only of interest and dividends and is more than $950 but less than $9,500. Since the election sometimes results in a higher overall family tax bill, you’ll want to consider the pros and cons before choosing this option.

Even if your child is not required to file, a return should be filed if your child had income tax withheld from his or her pay and wants to have that money refunded.